Synopsis: State employee health benefits. Provides that, if the state personnel department establishes a self-insurance program covering health care services, there must be at least one policy option that has a $5,000 deductible. Provides that, if the state personnel department establishes a self-insurance program covering health care services, all out-of-pocket expenses paid by the employee must be applied to any applicable deductible. Establishes a health benefits committee to direct and monitor the state personnel department on employee health benefits. Requires the state personnel department to establish an employee benefits ombudsman division to assist employees with issues regarding employee health benefits. Requires the employee benefits

Effective: July 1, 1999.

    January 27, 1999, read first time and referred to Committee on Insurance, Corporations and Small Business.

ombudsman to forward complaints regarding coverage to the state department of insurance. Defines a rural employee as a covered individual who lives in a county that does not have a second class city or a consolidated city and is not contiguous to a county with a second class city or a consolidated city. Requires that rural employees must be allowed to obtain health care services from any health care provider without financial penalties, unless otherwise directed by the health benefits committee. Requires a self-insurance program or contract with a prepaid health care delivery plan for state employees to provide coverage for laboratory services provided by a laboratory services provider chosen by the covered individual's treating physician. Prohibits financial penalties to the covered individual for obtaining laboratory services from a laboratory services provider chosen by the covered individual's treating physician. Removes provisions canceling eligibility for group health insurance coverage for retired state employees upon eligibility for Medicare. Requires a health maintenance organization to make determinations of medical necessity for health care services in writing and base the determination on certain standards. Provides standards on which a health maintenance organization must base its determinations of medical necessity.

    A BILL FOR AN ACT to amend the Indiana Code concerning state and local administration.

    SECTION 1. IC 5-10-8-1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 1. The following definitions apply in this chapter:
        (1) "Employee" means:
            (A) an elected or appointed officer or official, or a full-time employee;
            (B) if the individual is employed by a school corporation, a full-time or part-time employee;
            (C) for a local unit public employer, a full-time or part-time employee or a person who provides personal services to the unit under contract during the contract period; or
            (D) a senior judge appointed under IC 33-2-1-8 ;
        whose services have continued without interruption at least thirty (30) days.
        (2) "Group insurance" means any of the kinds of insurance

fulfilling the definitions and requirements of group insurance contained in IC 27-1.
        (3) "Health care provider" means a physician, hospital, or any other person licensed or authorized to furnish health care services.
        (4) "Health care services" has the meaning set forth in IC 27-13-1-18.
        (5) "Insurance" means insurance upon or in relation to human life in all its forms, including life insurance, health insurance, disability insurance, accident insurance, hospitalization insurance, surgery insurance, medical insurance, and supplemental medical insurance.
        (4) (6) "Local unit" includes a city, town, county, township, or school corporation.
        (5) (7) "Public employer" means the state or a local unit, including any board, commission, department, division, authority, institution, establishment, facility, or governmental unit under the supervision of either, having a payroll in relation to persons it immediately employs, even if it is not a separate taxing unit.
        (6) (8) "Public employer" does not include a state educational institution (as defined under IC 20-12-0.5-1 ).
        (7) (9) "Retired employee" means:
            (A) in the case of a public employer that participates in the public employees' retirement fund, a former employee who qualifies for a benefit under IC 5-10.3-8 ;
            (B) in the case of a public employer that participates in the teachers' retirement fund under IC 21-6.1, a former employee who qualifies for a benefit under IC 21-6.1-5 ; and
            (C) in the case of any other public employer, a former employee who meets the requirements established by the public employer for participation in a group insurance plan for retired employees.
        (8) (10) "Retirement date" means the date that the employee has chosen to receive retirement benefits from the employees' retirement fund.
    SECTION 2. IC 5-10-8-7 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 7. (a) The state, excluding state educational institutions (as defined by IC 20-12-0.5-1 ), may not purchase or maintain a policy of group insurance, except life insurance or long term care insurance under a long term care insurance policy (as defined in IC 27-8-12-5 ), for its employees.
    (b) With the consent of the governor, the state personnel department

may establish self-insurance programs to provide group insurance other than life or long term care insurance for state employees and retired state employees. If the state personnel department establishes a self-insurance program covering health care services, the program must be approved by the health benefits committee established under section 7.1 of this chapter. The state personnel department may contract with a private agency, business firm, limited liability company, or corporation for administrative services. A commission may not be paid for the placement of the contract. The department may require, as part of a contract for administrative services, that the provider of the administrative services offer to an employee terminating state employment the option to purchase, without evidence of insurability, an individual policy of insurance.
    (c) Notwithstanding subsection (a), with the consent of the governor and the approval of the health benefits committee established under section 7.1 of this chapter, the state personnel department may contract for health services for state employees through one (1) or more prepaid health care delivery plans.
    (d) The state personnel department shall adopt rules under IC 4-22-2 to establish long term and short term disability plans for state employees (except employees who hold elected offices (as defined by IC 3-5-2-17 )). The plans adopted under this subsection may include any provisions the department considers necessary and proper and must:
        (1) require participation in the plan by employees with six (6) months of continuous, full-time service;
        (2) require an employee to make a contribution to the plan in the form of a payroll deduction;
        (3) require that an employee's benefits under the short term disability plan be subject to a thirty (30) day elimination period and that benefits under the long term plan be subject to a six (6) month elimination period;
        (4) prohibit the termination of an employee who is eligible for benefits under the plan;
        (5) provide, after a seven (7) day elimination period, eighty percent (80%) of base biweekly wages for an employee disabled by injuries resulting from tortious acts, as distinguished from passive negligence, that occur within the employee's scope of state employment;
        (6) provide that an employee's benefits under the plan may be reduced, dollar for dollar, if the employee derives income from:
            (A) Social Security;
            (B) the public employees' retirement fund;
            (C) the Indiana state teachers' retirement fund;
            (D) pension disability;
            (E) worker's compensation;
            (F) benefits provided from another employer's group plan; or
            (G) remuneration for employment entered into after the disability was incurred.
        (The department of state revenue and the department of workforce development shall cooperate with the state personnel department to confirm that an employee has disclosed complete and accurate information necessary to administer subdivision (6).)
        (7) provide that an employee will not receive benefits under the plan for a disability resulting from causes specified in the rules; and
        (8) provide that, if an employee refuses to:
            (A) accept work assignments appropriate to the employee's medical condition;
            (B) submit information necessary for claim administration; or
            (C) submit to examinations by designated physicians;
        the employee forfeits benefits under the plan.
    (e) This section does not affect insurance for retirees under IC 5-10.3 or IC 21-6.1.
    (f) The state may pay part of the cost of self-insurance or prepaid health care delivery plans for its employees.
    (g) A state agency may not provide any insurance benefits to its employees that are not generally available to other state employees, unless specifically authorized by law.
    (h) The state may pay a part of the cost of group medical and life coverage for its employees.
     (i) If a self-insurance program covering health care services is established under subsection (b), the program must include at least one (1) plan option that has a five thousand dollar ($5,000) deductible.
    (j) If a self-insurance program covering health care services is established under subsection (b), all out-of-pocket expenses paid by the employee including:
        (1) copayments;
        (2) coinsurance; and
        (3) expenses greater than the usual and customary amount paid by the self-insurance program;
must be applied to any applicable deductible amount.
    SECTION 3. IC 5-10-8-7.1 IS ADDED TO THE INDIANA CODE

AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 7.1. (a) The health benefits committee is established for the purpose of directing and monitoring the state personnel department regarding self-insurance programs under section 7(b) of this chapter and contracts for health care services through prepaid health care delivery plans under section 7(c) of this chapter.
    (b) The health benefits committee shall consist of the following members appointed by the governor, to serve at the pleasure of the governor:
        (1) Two (2) legislators to serve as nonvoting, advisory members, one (1) from the house of representatives and one (1) from the senate.
        (2) One (1) representative appointed from a list submitted by the unity team.
        (3) One (1) representative appointed from a list submitted by the American Federation of State, County, and Municipal Employees.
        (4) The director of the state personnel department or the director's designee.
        (5) Three (3) at-large members to serve two (2) year renewable terms.
    (c) The state personnel department shall adopt rules under IC 4-22-2 to implement this section.
    SECTION 4. IC 5-10-8-7.3 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 7.3. (a) The state personnel department shall establish an employee benefits ombudsman division that shall assist individual employees by:
        (1) receiving, investigating, and responding to complaints and concerns regarding employee health benefits;
        (2) explaining employee health benefits;
        (3) assisting in the completion of claims forms related to employee health benefits; and
        (4) providing any other assistance with regard to employee health benefits.
    (b) The employee benefits ombudsman shall forward complaints regarding coverage under employee health benefits to the state department of insurance, which shall process complaints under IC 27-4-1-5.6.
    (c) The state personnel department shall adopt rules under IC 4-22-2 to implement this section.
    SECTION 5. IC 5-10-8-7.4 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 7.4. (a) As used in this section, "covered individual" means an individual who is:
        (1) covered under a self-insurance program established under section 7(b) of this chapter to provide group health coverage; or
        (2) entitled to health care services under a contract for health care services through a prepaid health care delivery plan that is entered into or renewed under section 7(c) of this chapter.
    (b) As used in this section, "rural employee" means a covered individual who lives in a county that:
        (1) does not have a second class city or a consolidated city; and
        (2) is not contiguous to a county that has a second class city or a consolidated city.
    (c) Except as provided in section 7.5 of this chapter, a self-insurance program established under section 7(b) of this chapter to provide health care coverage must provide that a rural employee may receive health care services from any health care provider.
    (d) Except as provided in section 7.5 of this chapter, a contract for health care services through a prepaid health care delivery plan that is entered into or renewed under section 7(c) of this chapter must provide that a rural employee may receive health care services from any health care provider.
    (e) Except as provided under subsection (f), the coverage required under subsection (c) and services required under subsection (d) may not be subject to dollar limits, deductibles, coinsurance, or copayment provisions that are less favorable to a rural employee than the dollar limits, deductibles, coinsurance, or copayment provisions applying to a covered individual who is not a rural employee under the self-insurance program or contract for health care services.
    (f) The health benefits committee established under section 7.1 of this chapter may establish a differential payment rate for rural employees not to exceed an additional one hundred dollars ($100) of deductible per contract year or an additional five percent (5%) of copayment for services obtained under subsections (c) and (d).
    SECTION 6. IC 5-10-8-7.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 7.5. (a) As used in this section, "covered individual"

means an individual who is:
        (1) covered under a self-insurance program established under section 7(b) of this chapter to provide group health coverage; or
        (2) entitled to health services under a contract for health services through a prepaid health care delivery plan that is entered into or renewed under section 7(c) of this chapter.
    (b) As used in this section, "laboratory services provider" means an individual or facility that provides laboratory services and:
        (1) has been Clinical Laboratory Improvement Amendments certified; or
        (2) meets any guidelines established by the state department of health.
    (c) A self-insurance program established under section 7(b) of this chapter to provide health care coverage must provide that covered individuals may receive laboratory services from a laboratory services provider selected by the covered individual's treating physician.
    (d) A contract with a prepaid health care delivery plan that is entered into or renewed under section 7(c) of this chapter must provide that covered individuals may receive laboratory services from a laboratory services provider selected by the covered individual's treating physician.
    (e) The coverage required by subsection (c) and services required by subsection (d) may not be subject to dollar limits, deductibles, or coinsurance provisions that are less favorable to covered individuals than the dollar limits, deductibles, or coinsurance provisions applying to physical illness generally under the self-insurance program or contract with a prepaid health care delivery plan.
    SECTION 7. IC 5-10-8-8 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 8. (a) This section applies only to the state and its employees who are not covered by a plan established under section 6 of this chapter.
    (b) After June 30, 1986, the state shall provide a group health insurance plan to each retired employee:
        (1) whose retirement date is:
            (A) after June 29, 1986, for a retired employee who was a member of the field examiners' retirement fund;
            (B) after May 31, 1986, for a retired employee who was a member of the Indiana state teachers' retirement fund; or
            (C) after June 30, 1986, for a retired employee not covered by clause (A) or (B);
        (2) who will have reached fifty-five (55) years of age on or before the employee's retirement date; but who will not be eligible on that date for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq.;
        (3) who will have completed twenty (20) years of creditable employment with a public employer on or before the employee's retirement date, ten (10) years of which shall have been completed immediately preceding the retirement; and
        (4) who will have completed at least fifteen (15) years of participation in the retirement plan of which the employee is a member on or before the employee's retirement date.
    (c) The state shall provide a group health insurance program to each retired employee:
        (1) who is a retired judge;
        (2) whose retirement date is after June 30, 1990;
        (3) who is at least sixty-two (62) years of age;
        (4) who is not eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq.; and
        (5) (4) who has at least eight (8) years of service credit as a participant in the Indiana judges' retirement fund, with at least eight (8) years of that service credit completed immediately preceding the judge's retirement.
    (d) The state shall provide a group health insurance program to each retired employee:
        (1) who is a retired participant under the prosecuting attorneys retirement fund;
        (2) whose retirement date is after January 1, 1990;
        (3) who is at least sixty-two (62) years of age;
        (4) who is not eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq.; and
        (5) (4) who has at least ten (10) years of service credit as a participant in the prosecuting attorneys retirement fund, with at least ten (10) years of that service credit completed immediately preceding the participant's retirement.
    (e) The state shall make available a group health insurance program to each former member of the general assembly or surviving spouse of each former member, if the former member:
        (1) is no longer a member of the general assembly;
        (2) is not eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq. or, in the case of a surviving spouse, the

surviving spouse is not eligible for Medicare coverage as prescribed by 42 U.S.C. 1395, et. seq.; and
        (3) (2) has at least ten (10) years of service credit as a member in the general assembly, with at least eight (8) years of that service credit completed immediately preceding the member's retirement or death.
A former member or surviving spouse of a former member who obtains insurance under this section is responsible for paying both the employer and the employee share of the cost of the coverage.
    (f) The group health insurance program required under subsections (b) through (e) must be equal to that offered active employees. The retired employee may participate in the group health insurance program if the retired employee pays an amount equal to the employer's and the employee's premium for the group health insurance for an active employee and if the retired employee within ninety (90) days after the employee's retirement date files a written request for insurance coverage with the employer. However, the employer may elect to pay any part of the retired employee's premium.
    (g) A retired employee's eligibility to continue insurance under this section ends when the employee becomes eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq., or when the employer terminates the health insurance program. A retired employee who is eligible for insurance coverage under this section may elect to have the employee's spouse covered under the health insurance program at the time the employee retires. If a retired employee's spouse pays the amount the retired employee would have been required to pay for coverage selected by the spouse, the spouse's subsequent eligibility to continue insurance under this section is not affected by the death of the retired employee. The surviving spouse's eligibility ends on the earliest of the following:
        (1) When the spouse becomes eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq.
        (2) (1) When the employer terminates the health insurance program.
        (3) (2) Two (2) years after the date of the employee's death.
        (4) (3) The date of the spouse's remarriage.
    (h) This subsection does not apply to an employee who is entitled to group insurance coverage under IC 20-6.1-6-1 (c). An employee who is on leave without pay is entitled to participate for ninety (90) days in any health insurance program maintained by the employer for active employees if the employee pays an amount equal to the total of the employer's and the employee's premiums for the insurance.
    (i) An employer may provide group health insurance for retired employees or their spouses not covered by this section and may provide group health insurance that contains provisions more favorable to retired employees and their spouses than required by this section. A public employer may provide group health insurance to an employee who is on leave without pay for a longer period than required by subsection (h).
    SECTION 8. IC 5-10-8-8.1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 8.1. (a) This section applies only to the state and former legislators, instead of section 8 of this chapter.
    (b) As used in this section, "legislator" means a member of the general assembly.
    (c) After June 30, 1988, the state shall provide to each retired legislator:
        (1) whose retirement date is after June 30, 1988;
        (2) who will have reached fifty-five (55) years of age on or before the legislator's retirement date but who is not participating in a group health insurance coverage plan,
            (A) including Medicare coverage as prescribed by 42 U.S.C. 1395 et seq.; but
            (B) not including a group health insurance plan provided by the state;
        (3) who served as a legislator for at least:
            (A) fifteen (15) years; and
            (B) ten (10) years immediately preceding the legislator's retirement date; and
        (4) who participated in a group health insurance plan provided by the state on the legislator's retirement date;
a group health insurance program that is equal to that offered active employees.
    (d) A retired legislator who qualifies under subsection (c) may participate in the group health insurance program if the retired legislator:
        (1) pays an amount equal to the employer's and employee's premium for the group health insurance for an active employee; and
        (2) within ninety (90) days after the legislator's retirement date files a written request for insurance coverage with the employer.
    (e) A retired legislator's eligibility to continue insurance under this section ends when the member becomes eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq., or when the employer

terminates the health insurance program.
    (f) A retired legislator who is eligible for insurance coverage under this section may elect to have the legislator's spouse covered under the health insurance program at the time the legislator retires. If a retired legislator's spouse pays the amount the retired legislator would have been required to pay for coverage selected by the spouse, the spouse's subsequent eligibility to continue insurance under this section is not affected by the death of the retired legislator and is not affected by the retired legislator's eligibility for Medicare. The spouse's eligibility ends on the earliest of the following:
        (1) When the spouse becomes eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq.
        (2) (1) When the employer terminates the health insurance program.
        (3) (2) The date of the spouse's remarriage.
    (g) The surviving spouse of a legislator who dies or has died in office may elect to participate in the group health insurance program if all of the following apply:
        (1) The deceased legislator would have been eligible to participate in the group health insurance program under this section had the legislator retired on the day of the legislator's death.
        (2) The surviving spouse files a written request for insurance coverage with the employer.
        (3) The surviving spouse pays an amount equal to the employer's and employee's premium for the group health insurance for an active employee.
    (h) The eligibility of the surviving spouse of a legislator to purchase group health insurance under subsection (g) ends on the earliest of the following:
        (1) When the employer terminates the health insurance program.
        (2) The date of the spouse's remarriage.
        (3) When the spouse becomes eligible for Medicare coverage as prescribed by 42 U.S.C. 1395 et seq.
    SECTION 9. IC 27-13-7-7 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 7. The evidence of coverage required by section 5 of this chapter must contain the following:
        (1) A clear statement of the matters set forth in section 3(a) of this chapter.
         (2) A statement indicating how a determination of medical necessity for health care services is made, as provided in

section 7.5 of this chapter.
    SECTION 10. IC 27-13-7-7.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 1999]: Sec. 7.5. (a) A determination of medical necessity for health care services must be:
        (1) in writing; and
        (2) based on the standards provided in this section.
    (b) A health maintenance organization must base a determination of medical necessity on medical information provided by:
        (1) the enrollee;
        (2) a member of the enrollee's family; or
        (3) the:
            (A) physician; or
            (B) another provider, a program, or an agency;
        that provides health care services relative to the enrollee's diagnosis.
    (c) A determination of medical necessity must be made by a provider with expertise in the enrollee's area of diagnosis.
    (d) Health care services provided to an enrollee must be sufficient in amount, duration, and scope to reasonably achieve a positive outcome.
    (e) The amount, duration, and scope of health care services provided to an enrollee may not be arbitrarily denied or reduced solely because of the enrollee's diagnosis, type of illness, or condition.
    (f) Satisfaction of any one (1) of the following must result in authorization for and provision of health care services to an enrollee:
        (1) The health care service is expected to prevent the onset of an illness, disease, condition, or disability.
        (2) The health care service is expected to correct, cure, eliminate, or reduce a physical, mental, or developmental:
            (A) illness;
            (B) disease;
            (C) condition;
            (D) injury; or
            (E) disability.
        (3) The health care service will alleviate the pain of an illness, disease, condition, injury, or disability.
        (4) The health care service will assist the enrollee to do the following:
            (A) Prevent the development of a secondary condition.
            (B) Achieve, maintain, or improve functional capacity in performing daily activities, taking into account the following:
                (i) The functional capacity of the enrollee.
                (ii) The functional capacity that is appropriate for an individual who is the same age as the enrollee.
    SECTION 11. [EFFECTIVE JULY 1, 1999] (a) IC 5-10-8-7 , as amended by this act, applies to any self-insurance program or contract for health care services through a prepaid health care delivery plan that is established, amended, issued, entered into, or renewed after January 1, 2000.
    (b) IC 5-10-8-7.1 and IC 5-10-8-7.4 , both as added by this act, apply to any self-insurance program or contract for health care services through a prepaid health care delivery plan that is established, amended, issued, entered into, or renewed after January 1, 2000.
    (c) This SECTION expires June 30, 2005.
    SECTION 12. [EFFECTIVE JULY 1, 1999] (a) IC 5-10-8-7.5 , as added by this act, applies to a self-insurance program or a contract with a prepaid health care delivery plan that is established, amended, issued, entered into, delivered, or renewed after January 1, 2000.
    (b) This SECTION expires June 30, 2005.